Exchange Rate
Definition
The exchange rate refers to the value of one currency in terms of another currency. It determines how much of one currency you can get in exchange for another.
Analogy
Think of the exchange rate as a price tag on different currencies. Just like you compare prices when shopping, the exchange rate helps you compare the value of different currencies when exchanging money.
Related terms
Foreign Exchange Market: This term refers to the global marketplace where currencies are bought and sold.
Appreciation: Appreciation occurs when a currency increases in value relative to another currency.
Depreciation: Depreciation occurs when a currency decreases in value relative to another currency.
"Exchange Rate" appears in:
Study guides (1)
Practice Questions (14)
What happens when the exchange rate decreases?
When demand for euros increases due to a preference for European products, what happens to the exchange rate?
When supply and demand for a currency both decrease, what happens to the exchange rate?
How does a decrease in the exchange rate affect the cost of goods and services from a country?
What causes changes in the exchange rate?
What happens to the quantity of a currency purchased when the exchange rate falls?
How does a decrease in the supply of a currency affect the exchange rate?
How does an increase in the money supply affect the exchange rate?
What happens to the exchange rate when the demand for a currency increases?
What happens to the exchange rate when the relative income of Europeans rises?
What effect does an increase in demand for American goods have on the exchange rate?
How does a higher interest rate in the US impact the exchange rate?
When a country practices an expansionary fiscal policy, what effect does it have on the exchange rate for that country's currency?
What happens to the exchange rate when a country implements a contractionary fiscal policy?
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